Merz Raises Alarm Over Germany’s Economic Outlook

(MENAFN) German Chancellor Friedrich Merz on Tuesday warned that the nation’s economic outlook remains “very critical” as his administration focuses on reigniting growth this year.

In a letter to lawmakers from his center-right coalition, Merz acknowledged that measures taken so far have fallen short of boosting Germany’s global competitiveness, noting the situation is “very critical in some areas.”

“In 2026, we will therefore have to focus on making the right political and legal decisions to radically improve conditions in Germany,” a news agency quoted from the document.

Germany’s economy contracted in both 2023 and 2024. Winter projections released in December 2025 by leading German economic institutes forecast growth of just 0.1% for 2025, weighed down by weak external demand and a steep drop in exports to the United States.

Analysts attribute the stalled recovery to high energy costs, sluggish global markets, slow structural reforms, and elevated U.S. tariffs.

Since taking office in May 2025, Merz has pledged to revive Europe’s largest economy through major public spending initiatives and increased investment in defense and infrastructure.

While his government has stressed that economic recovery will require time and has rolled out tax cuts and other reforms, business groups argue that progress remains far too slow to address urgent challenges.

MENAFN06012026000045017169ID1110562165